From the MicroStrategy website
The IT company MicroStrategy began buying bitcoins for $ 250 million in August because it is no longer comfortable with keeping cash reserves in dollars. Now the company has invested another $ 175 million in the cryptocurrency. This effectively turns the company into a Bitcoin ETF – while CEO Michael Saylor turns out to be a tough bitcoin maximalist. The question of who is taking a bet or a risk is no longer so easy to answer. Are those who invest in bitcoins betting on a trend that can fizzle out again? Or do those who hold their assets in fiat money such as euros or dollars risk their assets? For Michael Saylor, CEO of MicroStrategy, the answer is now simple. The head of the listed IT company from the USA has convinced his board of directors to translate the majority of the company’s cash reserves into Bitcoin. After investing around $ 250 million in August, the company is now stepping up and switching another $ 175 million. The company has exchanged a total of $ 425 million for 38,250 bitcoins and is becoming the first company outside the crypto industry to post such amounts of coins on its balance sheet.
Meanwhile, Saylor is of course becoming a star in the Bitcoin scene. In several interviews, explains what motives led him to bet on Bitcoin with almost half a billion dollars.
“A 500 million dollar block of ice that is melting away”
A few years ago, Saylor dismissed Bitcoin as a gamble that can only go wrong. Then he crawled into Bitcoin’s rabbit hole to come out as a maximalist at just the right moment. The real trigger to look at Bitcoin again was when Block.one, the company behind the cryptocurrency EOS, offered him $ 30 million for the Voice.com domain in mid-2019. Like many other IT entrepreneurs, Saylor invested in domains in the early days of the Internet. That a crypto firm was willing to spend so much money on a domain years after declaring Bitcoin dead got the CEO thinking. So he started digging deeper into crypto. He listened to Bitcoin podcasts, read blogs and devoured the books of Andreas Antonopolous. Soon after, his company was flourishing like never before. MicroStrategy became the Corona winner, and the company kept accumulating more cash in its bank accounts. In doing so, however, it increasingly exposed itself to the risk of inflation. The dollar is already a weak currency anyway, and it depreciates significantly against stocks, real estate, or higher education. Since the central bank has been printing even more money in the fight against the Corona recession, Saylor’s cash reserves have become an almost unbearable risk. “We had the painful realization that we were standing on the tip of a $ 500 million block of ice that was about to melt.” So Saylor gave his managers and directors the “homework” assignment to learn about Bitcoin, and began to take the legal, technical and financial steps to exchange part of the cash reserves for Bitcoin. In the course of this process, his belief in Bitcoin solidified and became an almost cultic conviction that many Bitcoiners know from personal experience.
The CEO as Bitcoin Maxi
In one Interview with the financial magazine Real Vision Saylor explains his enthusiasm for Bitcoin. If you gave rational people enough time and resources to understand Bitcoin, they would come to the same conclusion as he: If Bitcoin is not 100 times better than gold, “then it is 1,000,000 times better than gold”. Nobody who really understood Bitcoin puts only one percent of their assets in the cryptocurrency. Instead, he inevitably becomes afraid of not having enough bitcoins. Therefore, half of the supervisory board had already personally bought bitcoins. For Saylor it was incomprehensible that there are people who actually sold him more than 38,500 bitcoins. Who is willing to give something like that back for small profits in a laughable paper currency? Buying bitcoins may have been intended as a hedge against dollar inflation. But now it is more, much more: It is “a conscious decision by our company to make Bitcoin our standard.” MicroStrategy no longer recognizes the dollar as a reserve currency, but opts for Bitcoin. In the course of this change in consciousness, Saylor has also adopted the convictions of the “Bitcoin maximalists”: On the one hand, Bitcoin is a store of value for him, not a transaction medium, and so it scales splendidly:
“We acquired 21,454 BTC through 78,388 offchain transactions, and then transferred it to a cold wallet through 18 onchain transactions. Bitcoin scales perfectly as a store of value. ”Saylor is not interested in whether people pay with Bitcoin on the Internet. For him, it’s about having a scarce commodity, a currency that is decentralized and defies control, as if it were a law of nature and not a technical artifact. Something like that doesn’t have to scale onchain, and maybe it isn’t even allowed to. The CEO wouldn’t be a maximalist if he didn’t focus 100 percent on Bitcoin. MicroStrategy has not bought any ethers, no XRP, no Bitcoin Cash, no EOS. Not a single coin in another currency. Other cryptocurrencies are irrelevant to him, as is the typical dominance index of Coinmarketcap, according to which Bitcoin only accounts for 60 percent of the market. Because in truth, Bitcoin has a market share of more than 90 percent. This is shown by the “BTC Dominance” index, a page that excludes all proof of stake coins and, if desired, smart contract platforms such as Ethereum. Bitcoin then has around 93 percent of the remaining coins.
You can see it like that, but you don’t have to. If, like Saylor, you only started dealing with the subject in mid-2019, you run the risk of being ridiculed with such statements. Somebody snappy says on Twitter that this is “the worst ratio of ‘value of the investment’ and ‘understanding of the investment'” that he has ever come across.
But, according to Bitcoin maximalists, whoever criticizes Saylor should first invest half a billion themselves. Those who have the capital will already know what they are doing. DeFi and Ethereum and Smart Contracts are of course great and fascinating and, as Saylor also thinks, “a nice experiment”. But for someone who is just looking for a store of value that is built to last, that doesn’t matter, if not annoying. He wants a network that is predictable, unmanipulable and indestructible.
Is MicroStrategy just the beginning?
For the CEO, it’s obvious that he’s just getting started. After all, the decision to shift capital into Bitcoin is the inevitable consequence of understanding Bitcoin. There are 35,000 publicly traded companies in the US alone, and those companies are sitting on $ 5 trillion in cash. For these cash reserves they pay negative interest in the form of inflation. They melt like a block of ice. The companies put up with it because they have no alternative to cash. Once they understand that there is an alternative with Bitcoin, they will change a part. It would be stupid not to do it. Businessmen tend not to stay on sinking ships. For Saylor, it is inevitable that the price will rise if only a portion of US companies switch some of their cash reserves into Bitcoin. But he doesn’t speculate on price gains. His company didn’t buy the bitcoins to sell for more dollars. They should be a foundation for eternity. Saylor says he wants the CEO who will take over his post in 100 years’ time to own these bitcoins as a cash reserve. They are the new standard. Of course, Saylor’s zeal slips off into the irrational. He got infected with Bitcoin. But the market proves him right. The Bitcoin investment effectively turned MicroStrategy into a Bitcoin ETF: Anyone who buys shares in the company is buying into the success of Bitcoin. Their price is doing well: Since the announcement on August 11th that he had bought bitcoins, he has invested 30 percent; Last Tuesday alone, when Saylor made the second purchase public, it jumped nine percent. The market is attentive. If the example catches on, the Fiat meltdown could begin.